The South Ain’t Gettin’ Personal Finance

I happened to enjoy some extra reading time last week because Snowmaggeddon 2014 kept most of Atlanta captive to their homes. I ran across this article from Time Business and Money that talked about the plight of Americans and their money. In it, they cite the Assets and Opportunity Scorecard report from the Center for Enterprise Development. This report found 44% of Americans were living under “persistent economic insecurity that makes it difficult to look beyond immediate needs and plan for a more secure future.”

According to the article, this segment of the population has less than $5,887 in savings for a family of four. With credit scores also shot from the latest recession and housing crisis, they feel their only alternative to manage through emergencies is to resort to high interest credit cards or payday loans. As those of us deeply focused on personal finance know, these types of programs only serve to bring further damage to the individual’s financial state.

Being an investigative personal finance blogger, I decided to look up the full CFED report and find where my home state of Georgia ranked. A couple of clicks and…uh-oh…that doesn’t look good. However, the results showed an even more alarming trend as it relates to the entire U.S. South. Here are the ranks for states 42-51 on the list (District of Columbia included):

42. New Mexico

43. Arkansas

44. Louisiana (tie)

44. Tennessee (tie)

46. North Carolina

47. South Carolina

48. Alabama

49. Georgia

50. Nevada

51. Mississippi

Notice any trends on that list? Pretty disturbing. Basically, the average Southerner is living paycheck to paycheck at best, with little clue how to manage their money.

What’s Going On Here?

So many economic and societal issues could impact these results, so it’s hard to know where to start. When I looked at the internals of the CFED report, however, my eyes were drawn to one segment that directly links to my chosen profession – education.

Check out some of these statistics from the report:

15% of Georgia borrowers entering repayment of their student loans default within three years

28% of adults in Georgia have at least a 4-yr college degree

70% of Georgia students entering high school in the 2007-08 school year graduated in the class of 2012

32% of Georgia 8th graders perform at or above proficient in reading

29% of Georgia 8th graders perform at or above proficient in math

59% of Georgia college students graduate with student loan debt

As you can see the education sub-report for Georgia is pretty abysmal. Based on the rankings above, my hunch is that I would find similar statistics for the other Southern states. Needless to say, we have some serious issues with our overall educational system. (To check out your state click here. Select state, then choose “Click to Select Front Page Statistics.”)

This doesn’t come as a surprise as the southern states have consistently ranked near the bottom for overall quality of education. In fact, all the states in the aforementioned list received a C+ or lower in educational policy and performance as ranked by Education Week in their annual state report card.

Is There a Linkage?

Could it be these two issues – educational achievement and personal finance are linked to one another? Does one’s level of education play a role in their financial success? While I can’t draw any absolute conclusions (like saying “If you are smart, then you will be rich”), the evidence from these two reports seems to gel together quite nicely.

The easy path here is to fault families for not teaching their kids about personal finance. If, however, families are in such dire straits as the CFED report mentioned, they are not knowledgeable enough to handle their own lives, let alone teach their children about personal finance. Based on that, it would seem the effort to turn the tide among that illiterate segment of the population has to start somewhere else…in the school system.

School represents the best place to catch young people and raise their level of financial literacy. They are required by law to attend so we have them captive for 7+ hours per day. Can’t one of those hours be devoted to some form of economics or personal finance curriculum during the four years they attend?

My experience as a personal finance teacher shows students will eat it up. Students love to talk about money and how it impacts their lives. It’s almost as simple as walking into a classroom and asking, “Does anyone want to be rich?” or saying “This is the most important class you will ever take. Don’t tell your science teacher.” You’ll have their attention.

Once you have their attention, it’s simply a matter of empowering them with quality content that is passionately delivered and connects with their dreams.

If these students started making wise financial decisions in their teen years, they most likely would be rich by retirement, if they follow the basics of saving and investing early and often. That pattern occurring over several generations on a broad state scale could reverse the trend seen in the economic reports. As families get financially healthier and smarter, the whole economic climate of the region could improve.

The solution is simple – educate the young to improve the future. Sure the implementation in the schools would be challenging and there are tough societal conditions to overcome. But what do we have to lose?

Nothing in my mind because one things for sure…right now, the South just ain’t gettin’ personal finance.

Where did your home state rank in the report? Who is more responsible for teaching financial literacy – the home or the school system? What other ways can the school system and families work together to improve children’s financial literacy?

For my day job, I'm a high school government and economics teacher and school counselor at a private Christian school. In my off hours, I love collecting baseball cards, running my rental real estate properties, going on vacations with my four kids and hearing my wife talk about all the cool things CPAs do at work. You can connect with me on Facebook,Twitter and Google+.

Comments

Education is the the key out of poverty. Even if you make mistakes, you have a much greater chance of digging yourself out with a degree and marketable skills. My home state of KY ranks 38, and Colorado ranks 14. However, where we live in the rural area of the state, we are closer to the South in characteristics. Poverty=poor school attendance=low graduation rates=welfare. I am by no means saying poor people are dumb and rich people are smart, but if it takes all of your energy just to put food on the table, you are likely not likely making sure Jr is reading two books a night and has all his homework done. The kids that come from the reservation have the lowest attendance rate per demographic in our county. If they don’t get on the bus, there is no one willing or able to drive them to school. I’m not saying parents don’t want better or care, but they just don’t have the energy or skills to make that change happen. I don’t know that answer, but I do like the idea of financial literacy in schools. We just need a way to get those at risk kids to be at school!

“…[poorer parents] just don’t have the energy or skills to make that change happen.” That’s a great point. Which is all the more reason schools seem to be the answer for that demographic. Thanks for that perspective Kim!

Great post here, Brian. Education is so important yet it also seems like one of the hardest issues for policymakers and stakeholders to tackle. I wonder how much of an impact a mandatory personal finance course would have? Then again, if reading and basic subject knowledge isn’t up to par it might not do much good.

I know…it’s very discouraging to see the reading and math scores so low. In relation to personal finance, the math scores basically tell us that the average high school graduate won’t know how to balance a checkbook or put together a budget (both math related tasks).

Wow, Brian. Scary stuff here. I was surprised to see that our MN ranked 7th on the list. I know they’re not teaching PF in the schools, at least not in most of them, so I’m not sure what the deal is. Maybe because it’s a polar ice cap for 6 months out of the year we have more time to talk about money, being we’re stuck in side for 180 straight days. 🙂

Wow, I had no idea the south lagged the way they did with education or personal finance. I’m not American so that might have something to do with that…
In Canada, it’s our maritime provinces that seem to be hit hard with the living paycheck to paycheck stuff. But in those provinces, the economies are generally tougher and good quality jobs harder to come by. All their people fly west. It’s probably an interplay between larger scale economics and smaller scale individual decisions by people. Pretty complicated stuff!

States that score higher generally pay their teachers higher salaries. How does that help? It attracts smarter, more accomplished college graduates to work there. They do a better job teaching because they are smart and capable. Too many school districts in the South can’t afford to pay their teachers enough. Their tax base is too low. Even in states with higher scores, there is a pretty direct correlation between teacher salaries and students scores. It’s unfortunate but true.

Teaching financial literacy in the schools does need to be K-12 with age appropriate lessons. It can be done! But again, you need high quality teachers to do a good job.

Excellent point Maggie! Quality teachers go a long way in getting kids enthusiastic about the subject. If you can’t find them you can always farm this particular topic out. Even though I know personal finance we use Dave Ramsey’s high school DVD curriculum at our school. He’s a great communicator. They also have his daughter Rachel as part of the program. She brings a younger voice/look to the program that high school students can relate to.

Wow that’s weird the south didn’t do so well. I think it should be taught in both, however, I’m betting most of the parents aren’t that great at it either. So like math, basic personal finance should be taught in school. How to get around the emotional side of PF..tough call. I think that is a HUGE component when it comes to money. I mean it’s like diet. We all know what we “should” be doing, but most of us aren’t. Garbage in, garbage out.

Ideally all this financial training would start in the home but that doesn’t seem to be happening, probably for some of the reasons Shannon pointed out. I agree with the emotional component being a barrier…people have to see their need and then get fired up about doing something about it.

As you know, I am huge advocate for financially literacy and would love for it to happen in both the home and at school. Some parents will never do it because they are ashamed of their own financial mistakes or don’t feel they have the knowledge to do so. Kids only learn from what they observe so they need some place to show them a different way. I also believe if financial literacy became a requirement in school, it would also help parents become aware of this need. When I talk to parents, they have never even thought about the need to talk to kid their kids about money and I can see eyes lit up. And after any event where I do talk about kids and money, I am mobbed the next few days on the playground when I walk the girls to school by other Moms. They want to know what they should be doing. Money has just been a taboo subject for so long that people don’t know where to begin.

I agree wholeheartedly that kids are EAGER to learn about money. Why? Because they are smart enough to know that money matters. So let’s take that interest and show them how to use money and make smart decisions with it. I can only imagine the great conversations you are having with your students and I am so grateful that they have that opportunity to learn from you.

I knew this was right up your alley. 🙂 I think you listed some great reasons why this isn’t happening at home. I’m unsure as to why it doesn’t seem to be a priority at school. Maybe it’s simply indifference and seen as a low priority by the administration. Your experience with the playground moms proves otherwise. Thanks for sharing your thoughts on this!

I am pessimistic that financial literacy education in secondary school will have much of an impact. The timing is all wrong: high school kids typically don’t have the ability to put that knowledge to use. They might work part time, but have few real financial obligations, no access to credit, no rent to pay, etc. When the time does roll around to make a decision on credit cards or 401k contributions at their first full-time job, just like their pre-calc, the lesson once learned has been forgotten. This article in Time had an interesting alternative: just-in-time financial educaiton

It actually has to start much earlier than high school. My thought is that something should be done at every level – elementary, middle school, high school. While some high school students will turn a deaf ear, my experience is they can see the implications for their lives. I have juniors and seniors who work and pay for many of their own expenses (gas, clothes, eating out). We simply have to teach them something before they get to college. That’s when the big credit card companies swoop in and nail them during freshmen orientation with offers for free T-shirts if you sign up for their credit card. I’ve read other research that shows more college students are dropping out of college now because of poor finances than are dropping out due to academic failure.

Clearly they are not effective. I don’t know why the results are so dismal. Perhaps because it’s not being done on a grand scale. Maybe there is no real life, practical application being taught/demonstrated…no follow through being done…? Sounds like that’s a topic to research for another post. 🙂

I wonder if there is a link between the amount of “financial education” taught in schools as well.. As a society, I think we need to make a far greater effort to help teach people the value of saving, and the dangers of living this way.

That’s a nice point Chaz. This has to be done early before the drop out rate kicks in. I’d favor a tiered approach with teaching segments happening in upper elementary, middle school and early high school (with more advanced classes kicking in for juniors and seniors who are taking electives).

I love how the virtual school is being implemented. We are working on that initiative at our private school and the kids who have taken online classes love it. We will be looking into it for our daughter when she gets to high school.

That is interesting Stefanie. And with so many verses in the Bible dedicated to the topic of money, you’d think we would know better. Maybe we are also not as spiritually aware as that description intimates.

I am in NC and we are not good either. We are right there with GA. I know that here there is a lot of uneducated people living outside of the bigger cities. This is a farming state that is trying to transform, but it is hard when there are so many uneducated people.

My state’s numbers surprised me as well, though NY is really diverse, so it’s hard to say what’s happening in the rest of the state. Education has always been pretty important where I live; my graduating class was about 500 just from one high school, and the other probably had the same amount. It gets a little better once you get to the college statistics at least. I do agree that there should be a class on financial literacy, though. We had some home ec classes that changed quarterly, and it would have fit perfectly there.

Yikes! I’m Canadian so my area wouldn’t be on the list at all, but I know it’s not doing much better. There must be a disconnect – perhaps the school curriculum is divided differently for the south, or something of that nature.

Wow, I clicked through to look at MA and I have to say that I was pretty surprised at the numbers. Better than Georgia, but not by a ton. Only 48% of 8th graders are proficient in reading and only 55% are proficient in math. Those numbers are not good!

Not a good sign when those percentages are the best we’re doing. Granted, I know next to nothing about education policy so maybe there are some underlying reasons that put more context behind those numbers. But at first glance they seem troubling.

I agree…I think that reflects the overall level of education in America compared to other parts of the world where education is given more of a priority. The overall grade for America on that Education Week Report Card was a C+. So we are basically doing average as a whole.

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